Councillors eye reserve to help offset tax hike

Jason Markusoff, Calgary Herald11.08.2013

The June floods loom large over Calgary city council's budget talks. Many councillors say they hope to use existing reserves to help avoid implementing the full 6.1 per cent tax hike currently on tap for 2014.JONATHAN HAYWARD
/ THE CANADIAN PRESS

Calgary city council is examining options to fund flood clean-up and mitigation, including tapping reserves to free-up money to offset at least part of the proposed 2014 tax hike.Nathan Denette
/ THE CANADIAN PRESS

Council’s controversial $52-million extra tax increase appears destined to make its way back into Calgarians’ pockets next year, after many councillors appeared unconvinced by city staff’s recommendation for the money’s use in the 2014 budget.

The mayor and several colleagues said they’re confident they can reduce the 6.1-per-cent tax increase on tap for 2014, largely by using reserves instead of the $52 million to fund as-yet undisclosed measures to protect the city from future floods.

Doing so would allow council to lower the tax hike closer to two or three per cent. Every percentage point knocked off the tax rate would save the typical homeowner $15.57 a year, down from the $94.97 annual increase the draft budget proposes.

Chief financial officer Eric Sawyer said post-flood resiliency upgrades — like new berms or moving key equipment out of city buildings’ basements — is the “logical” choice for the “tax room” increase next year. But he gave council a way to divert that money back to taxpayers next year, by acknowledging that council’s $300-million fiscal stability reserve can absorb a post-disaster shock

“There is an opportunity to draw on it a bit, but there’s a limit, for sure,” Sawyer told reporters Thursday.

“In my view, if we had to draw $50 to $100 million, we’d still have a cushion.”

This ends several years of accepted wisdom around City Hall about council’s key reserve: that it needed to be continually built up, and shouldn’t be raided so swiftly.

But it’s risen rapidly, and is now double what it was worth in 2008.

“The damn thing’s gone up to $300 million. Come on. It’s time to start giving taxpayers a break,” Coun. Ray Jones said. He said his Ward 5 residents’ demand that he return the $52 million hike — which he voted against this spring — means more to him that what city executives urge.

“I don’t believe we should have a $300-million fund sitting there, saying ‘just in case of a rainy day.’ This is a rainy day,” Coun. Shane Keating told reporters.

Mayor Naheed Nenshi has never come out in favour of returning the $52-million increase to taxpayers, but the nine councillors who now support that measure form a clear majority on council.

Their mostly conservative ranks include centrist Coun. Richard Pootmans who feels there’s little appetite among colleagues to keep the controversial hike again this year, or keep the 6.1-per-cent mill rate hike in place.

“I think we can do better than that and after the briefing this morning, I’m very optimistic we can beat that number,” he said.

Council gave its first OK to the $52 million tax increase in spring, to offset a lower provincial take from property taxes. The members didn’t have a clear plan for using the money and consulted the public, and then pledged the first instalment in July to flood recovery and suggested maybe doing the same with the 2014 funds.

Councillors have panned the idea of using the past tax hike to cover flood mitigation measures even before seeing the list of proposed measures, which will come out shortly before Nov. 25, when council begins debating the 2014 budget.

But the costs of simply restoring what the June disaster has devastated show throughout next year’s fiscal blueprint — including a now-estimated $445 million in infrastructure repair costs.

City officials now estimate that insurers and provincial relief programs will only cover 70 per cent of that. The rest will have to come from utility debt and fee increases — including a four-per-cent surcharge on drainage bills next year — a bit from reserves, and the entirety of this year’s already approved slice of the $52 million.

Meanwhile, the province will finance some of the city’s flood protection upgrades, but can’t say how much until Ottawa determines its national mitigation program, said a spokeswoman for Municipal Affairs Minister Doug Griffiths.

“There will be a shared responsibility on mitigation measures. It’s the way it’s been in the past,” Kathleen Range said.

The draft city budget provided rosier news on the operating budget: the city can afford to fund flood cleanup and mitigation planning without hiking taxes further, while more money from extra transit ridership will deliver a boost to bus service, security and maintenance.

City figures indicate that Calgary still enjoys one of the lowest municipal property taxes among big Canadian cities. But the rate has increased substantially in recent years, including by more than 30 per cent for homeowners over the last three years.

Rookie Coun. Ward Sutherland wants to get next year’s tax hike down to 2.2 per cent. Coun. Andre Chabot, a veteran conservative member, expects there to be additional funding demands that make getting it that low difficult.

“It’s going to be add and take-away,” he said.

“What we’ll end up with as a number? I’m hoping we can get it around 3.5, and I think I’m being optimistic by suggesting that.”

Nenshi was away in Edmonton for provincial meetings Thursday, but plans to share ideas later this month on how to trim down the tax increase, according to a statement his office sent out.

“As I have done in previous years, I will continue to search for more efficiencies in the budget,” the statement says.

Tax increase for 2014 proposed at 6.1 per cent, though most councillors are confident they’ll lower it

Rebuilding and restoring flood infrastructure now estimated at $445 million

City expects $319 million for flood infrastructure from insurance and province’s disaster program

Rest to come from $52 million resulting from last spring’s tax hike, $68 million through utility debt/fees, $6 million from reserves — though city worried that may rise if province/insurance coverage is lower

Staff recommends council use 2014’s slice of $52-million tax hike for flood mitigation, but CFO says reserve fund could handle it

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